1987 (7) TMI 93 - HC - Central Excise

Summary

Issues Involved:
1. Applicability of the doctrine of promissory estoppel against a taxing statute.
2. Discrimination under Article 14 of the Constitution of India.
3. Government's power to withdraw the benefit of exemption before the stipulated time.

Issue-wise Detailed Analysis:

1. Applicability of the Doctrine of Promissory Estoppel Against a Taxing Statute:
The central issue revolves around whether the doctrine of promissory estoppel can be invoked against the Central Government in the context of a taxing statute. The petitioners, manufacturers of tyres and tubes, argued that the government could not withdraw the 1976 notification granting a rebate on excise duty until March 31, 1979, as it would violate the doctrine of promissory estoppel.

The court examined various judgments, including the landmark decision in *Motilal Padampat Sugar Mills Co. Ltd. v. The State of Uttar Pradesh* and *Union of India v. Godfrey Philips India Ltd.*, which clarified that promissory estoppel can apply against the government except when it involves legislative functions or statutory prohibitions. The court noted that the notifications issued under Rule 8 of the Central Excise Rules are legislative in character but do not equate to primary legislation passed by Parliament. Therefore, the government is bound by its promise unless overriding public interest justifies a departure.

The court concluded that the petitioners had indeed acted upon the 1976 notification by filing declarations and making significant investments to increase production, thereby altering their position based on the promise of a rebate.

2. Discrimination Under Article 14 of the Constitution of India:
The petitioners contended that the second notification issued in 1978 was discriminatory as it favored certain manufacturers with smaller factories, thereby violating Article 14 of the Constitution. The court, however, chose not to delve deeply into this issue, as the matter could be resolved primarily on the basis of the doctrine of promissory estoppel.

3. Government's Power to Withdraw the Benefit of Exemption Before the Stipulated Time:
The government argued that the withdrawal of the exemption was in the public interest. The affidavit submitted by the Assistant Collector of Central Excise stated that the 1976 scheme primarily benefited a few manufacturers, creating an inequitable situation. The new scheme aimed to assist smaller manufacturers by providing them with a rebate on excise duty.

The court referred to the principles laid out in *Motilal Padampat Sugar Mills Co. Ltd.*, emphasizing that the government must provide substantial evidence to justify that overriding public interest necessitates the withdrawal of the exemption. Mere assertions of public interest or policy changes are insufficient without concrete proof.

The court found that the government failed to provide adequate material to substantiate its claim that the exemption's withdrawal was in the public interest. Consequently, the court ruled that the government must honor the exemption until March 31, 1979, as initially promised.

Conclusion:
The court made the rule absolute in terms of prayer (a), thereby upholding the petitioners' entitlement to the rebate until March 31, 1979. The bank guarantees furnished by the petitioners were to continue for eight weeks from the date of the judgment, after which they would be canceled and returned to the petitioners. No order as to costs was made.